Where to put 600k for a year

[DavidA]

We are having a house built and will pay on completion around Feb 2023. We are about to put our current house on the market. Current frothy market should sell by April then we will move into rented for 10 months. Where do we put the proceeds to protect the value but hopefully make some money. First think will be premium bonds to the max thereafter both isa contributions thereafter i a favouring a few investment trusts. Any suggestions for 2022? Thanks

[Midsmartin]

If you definitely need all the money back on completion then I'd be wary of having more than a small fraction in the stock market, as there is a non zero chance that it may drop in value by tens of percent when you need it.

How much bother would it be if you lost say 10% by the time you need it? What about 25%? Or any other number!

Perhaps look at some non volatile capital preservation trusts such as CGT (capital gearing trust), or a utilities trust for a bit of income. But to be honest if you will definitely need the cash to pay for a house then I'd stick with cash for nearly all of it, even if you will be losing money after inflation.

If someone suggested an interesting tech fund and it loses 50% in a hypothetical crash, you wouldn't thank them.

[Dod101]

If you definitely need the money by Feb 2023 or indeed at any specific time (and it sounds as though you do) I would not be anywhere near the stockmarket in investment trusts or anything else. Did no one tell you that stocks and shares are volatile? By all means put the maximum into premium bonds. You might make a million or more likely I guess several £25 or £50 wins.

The balance surely needs to go into cash so simply shop around for the best rate you can get in relation to the security of the principal sum. An ISA contribution is hardly worth the effort for a year or even less.

Dod

[Hariseldon58]

Sensible replies, money required in a years time it cash/cash equivalents for sure.

I then thought at what time period would I invest substantially in the market if I had a definite need for the money, in full, on a future date.

Ten years yes, five years…

[EverybodyKnows]

Given the amounts involved you might want to spread the money around in case the institution fails. That, or put it into the NS&I which is fully protected.

[Mike4]

A couple of points.

Firstly, even if you managed to complete on your sale before 5th April and cram £80k into two ISAs, does the same question still not arise? You still need to decide what investments to buy inside the ISA as it is only a zero tax wrapper.

Secondly, you may be confident right now of your new build completion date but it is not uncommon for completion dates to over-run, although if you are buying a house on a site built by one of the major national house builders they are usually on schedule. Do check your purchase contract though - the builders usually retain full control of the completion date AIUI. It could be annoying to invest based on one year then find you don't get your new house for 18 months.

[AsleepInYorkshire]

We are having a house built and will pay on completion around Feb 2023. We are about to put our current house on the market. Current frothy market should sell by April then we will move into rented for 10 months. Where do we put the proceeds to protect the value but hopefully make some money. First think will be premium bonds to the max thereafter both isa contributions thereafter i a favouring a few investment trusts. Any suggestions for 2022? Thanks

Hi David,

I think your question raises more questions. Sorry. What follows is either tough love or the thoughts of a deranged and cynical professional who has spent 41 years in construction. That's 40 too long. You've said completion is "about Feb 2023". Which means absolutely nothing. The terminology used passes the risk of the completion date to you. They could finish three months late or six months late and you would be bearing the costs associated with the delay. Let me put this another way ... they are telling you they can complete when they want. All you are is a source of income.

What would happen if the site they are building on gets a health and safety prohibition notice? An example of how quickly dates can move South. And I can fill a book of issues that have, can and will arise to delay completion.

May I humbly suggest you consider timelines first please. They aren't fixed. There's a huge risk accordingly. And that risk will be yours to bear.

If the market is "frothy" then why do you need to sell so early? If you haven't got a completion date cast in stone, and from your post I assume you don't then, I'd focus on that more closely.

That aside I'd suggest that if you keep the equity in cash you need to remind yourself of the banking insurance limits which are £85K per account.

I'm sure you're looking forward to your new home. It's a great feeling. But 41 years in the industry tells me I should reply as I have.

AiY

[Spet0789]

As others have said, you need to be looking at cash or equivalents.

Given your circumstances I believe deposit protection will cover you up to £1m for 6 months. DYOR. After that, use a combination of multiple deposit accounts with different institutions, NS&I and, if you feel you have to, a short dated gilt ETF.

For this purpose do not go near equities.

[Cornytiv34]

Remember with ISA’s capital losses cannot be set against gains elsewhere
Mike

[Midsmartin]

With your timescale I'd also look at one year bonds available from various institutions

https://moneyfacts.co.uk/savings-accoun ... ate-bonds/

[vrdiver]

As others have said, if you need a specific amount of cash on a specific date, then the stock market is a really, really risky option.

If the completion date is Feb 2023, why not sell later in the year? You save the rent, and will have more visibility on how the build is going.

If you had to get a bridging loan whilst waiting to sell the old house, how many months of rent before a 6 month bridging loan is cheaper? You currently seem confident of selling in 3 months or so, which might factor into your rent vs bridging loan thoughts.

Final thoughts on risk;. what if the builders have problems that really delay completion? (I'm thinking covid/labour/supply chain issues, on top of all the normal risks that AiY alluded to.) What if house prices rise over the summer and you've sold at what has now become a discount?
There is risk, whichever way you decide, so my advice would be to recognise it and decide which you can minimise and which you are most accepting of. Then make your plans accordingly.

VRD

[TheMotorcycleBoy]

I have had limited experiences with builders.....but personally if I had that much money that I will need again in a hurry I'd just lob as much of it as possible in my Marcus account!

https://www.marcus.co.uk/uk/en/public-site/help

Matt

[mc2fool]

I'd agree with all the "keep it in cash" comments. I take it from the "we" that there's two of you and so, if possible, you could arrange for your £600k to be split as 2 * £50k into Premium Bonds (a good idea IMO) and the remaining £500k to be 2 * £83,333 into savings accounts with three separate banking groups, keeping it all (and the small amount of interest you're going to get) within FSCS limits.

There's no point in making any particular savings account recommendations right now as the best ones changes on a regular basis. For your needs I'd look at instant access accounts, notice accounts and (depending on your timing) maybe 1 year fixed when the time is appropriate.

Personally I find that Money Saving Expert is always on top of what the best offerings are, https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/, but of course other sources are available.

[yieldhog]

The Family Building Society used to offer better odds than Premium Bonds.
I'm not sure they still offer these bonds but they could be a good parking spot for some of the cash:

https://www.familybuildingsociety.co.uk ... dfall-bond

Government guaranteed up to current limits. I owned some when I was in a similar situation to you, but never won anything.

Check if any other building societies offer similar schemes.

Y

[Walkeia]

Would it be worth asking / possible to delay completion by 6 months. Place your house for sale in Q1 with exchange in April but completion say September?

Long shot but if this was amenable to the buyer this solves your problem. The rent saved is a guaranteed tax free interest effectively and you are not exposed to the capital loss of the stock market.

[DavidA]

Thanks for all the responses. I am from the construction industry so hopefully should have all the variables nailed down by March this year. i.e fixed price and a fixed completion date around Feb 2023. Myself and lawyer working on it. I have a meeting with local estate agents this week to figure out the sale. I am favouring trying to get to completion on the sale of our house around the end of this year. We live in a beautiful part of the Devon coast and houses round here go straight away usually for full asking price to second homers who will want to use it over summer. I asked the question because we may get an offer we cant refuse say in the £700k region. Obviously we will need some to pay rent elsewhere.
I am surprised so many said don't put it in the stock market. I was erring towards some who purport to be "safer" like Personal Assets Trust or CGT. As you all know we get nothing at the banks though I haven't researched what the best rates are for a long term savings account or if there are any govt bonds around. Thanks for the tip on Family Building Society I will have a look at that.

[Alaric]

or if there are any govt bonds around.

There would be plenty of Government bond options. Don't expect returns any greater than you might get with a deposit account

[dealtn]

I am surprised so many said don't put it in the stock market.

That's because your question was posed with

Where do we put the proceeds to protect the value ...

That seems perfectly reasonable and surely shouldn't come as a surprise. If you are now changing your requirements, or redefining what is meant by "protect the value", you might get alternative suggestions.

[Dod101]

Thanks for all the responses. I am from the construction industry so hopefully should have all the variables nailed down by March this year. i.e fixed price and a fixed completion date around Feb 2023. Myself and lawyer working on it. I have a meeting with local estate agents this week to figure out the sale. I am favouring trying to get to completion on the sale of our house around the end of this year. We live in a beautiful part of the Devon coast and houses round here go straight away usually for full asking price to second homers who will want to use it over summer. I asked the question because we may get an offer we cant refuse say in the £700k region. Obviously we will need some to pay rent elsewhere.
I am surprised so many said don't put it in the stock market. I was erring towards some who purport to be "safer" like Personal Assets Trust or CGT. As you all know we get nothing at the banks though I haven't researched what the best rates are for a long term savings account or if there are any govt bonds around. Thanks for the tip on Family Building Society I will have a look at that.

But why would you put money you will need at a fixed time in the future into say Personal Assets Trust? You will get an insignificant dividend even if you left it there for a year, and you have a half decent chance of a modest gain in the capital and a good chance of losing some capital, especially as you will need to sell by a given time to fulfil your contract with the builder, that is you have no opportunity to delay a sale if needs be to try to let the share price recover. It is your money but there is no way I would ever do that in your circumstances.

Dod

[Dod101]

Sensible replies, money required in a years time it cash/cash equivalents for sure.

I then thought at what time period would I invest substantially in the market if I had a definite need for the money, in full, on a future date.

Ten years yes, five years…

Gee thanks. And who are you to say if my reply is sensible or not?

Dod